The Future of Food and Drink M&A: Trends and Opportunities
Considering our experience working on recent buy and sell side transactions over the last 18 months, we would like to share a few clear trends in food and drink M&A.
- Deal acceleration – Locally here in the UK, with a change of government looming if current opinion polls are to be believed, there seems to be a general fast forward of plans, to have deals done this side of the election whilst the corporate taxation environment is clear. Across the Eurozone we have seen this dynamic of deal acceleration play out in recent years – particularly when the political pendulum in a country seems likely to swing from right to left. In addition, discussions of potential new taxes on specific classes of food and drink such as confectionary, cereals, alcohol etc also drive deal acceleration.
- Debt is now expensive – We cannot ignore the interest rate environment in the UK and across the Eurozone. Debt became significantly more expensive and less available from late 2022 and this has tightened further as 2023 has unfolded. This is both suppressing lending as well as elongating timelines on debt funded transactions.
- Cash piles still need investing – Corporates and investors hold considerable cash that should ultimately be put to work. Deals in private equity have slowed as we have entered 2023, but food and beverage companies with strong fundamentals, compelling growth and a record of delivery are attracting interest and strong valuations.
- Deal volumes likely to climb next year – More broadly, obtaining nonorganic growth through M&A remains a key lever for corporates to deliver their growth plans and, as calm returns to the UK and Eurozone in the coming years, we expect deal volumes to rise in line with the return of macroeconomic stability.
- ESG strategy is starting to have a material impact – We see a growing importance of ESG positioning of the target business – not just with Private Equity investors, although these investors are most likely to favour a string ESG backstory. As we have found from being a B Corp ourselves, staff often respond very positively to the ESG mission which helps retention post takeover. Customers and consumers recognise the effort that goes in – provided it results in concrete actions and contributes to the value proposition of the business or its brands. It also tends to indicate greater control of business operations as ESG reporting requires new measurement and estimation tools for key KPIs. It can also help win, and retain, business.
To sum up, the food and drink M&A landscape is evolving rapidly and is driven by multiple factors and trends. We have witnessed these trends first hand and understand the implications they hold for businesses seeking growth and strategic partnerships.
Staying ahead of the curve requires insightful analysis and expert guidance. With our extensive experience and network, we are well-equipped to provide the advice you need to navigate this dynamic market successfully.
If you are interested in exploring M&A opportunities in the food and drink space, get in touch today. Contact our Managing Director Hamish at hamish@hra-global.com.
